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Facts
The assessee did not file his income tax return for AY 2017-18. An assessment was initiated to scrutinize cash deposits made during the demonetization period. Due to the assessee's non-response to notices, a best judgment assessment was completed under Section 144, resulting in additions for unexplained cash deposits under Section 69 and estimated business income under Section 44AD. The FAA dismissed the assessee's appeal, citing a lack of details provided.
Held
The Tribunal found the FAA's order cryptic and noted that not all evidence was considered. Despite the assessee's nonchalant attitude, the Tribunal, in the interest of justice and equity, restored the issues to the Assessing Officer for proper adjudication, as the original assessment was ex-parte.
Key Issues
Whether the best judgment assessment under Section 144 was valid without adherence to natural justice principles; the justification for additions of unexplained cash deposits under Section 69 and estimated business income under Section 44AD; and the non-consideration of audited books of accounts.
Sections Cited
250, 144, 133(6), 69, 44AD, 142(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: SHRI GEORGE GEORGE K & SHRI INTURI RAMA RAO
आदेश/ O R D E R PER GEORGE GEORGE K, VICE PRESIDENT:
This appeal filed by the assessee is directed against the order of Addl/JCIT(A)-1, Mumbai, dated 20.03.2025 passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Year is 2017-18.
2 -: 2. There is a delay of 48 days in filing this appeal. The assessee has filed an application for condonation of delay stating that he was suffering from Jaundice during the relevant period and consequently, there was a delay in filing this appeal. The assessee has also produced a medical certificate vouching his submission. On perusal of the reasons stated in the condonation application, we are of the view that there is reasonable cause for the delay in filing this appeal and no latches can be attributed to the assessee. Hence, we condone the delay of 48 days in filing this appeal and proceed to dispose off the case on merits.
The grounds raised
by the assessee read as follows:-
1. Because the Learned Commissioner of Income Tax (Appeals) [Ld. CIT(A)] has erred in law and on facts in passing the impugned order under section 250 of the Incometax Act, 1961. The order is arbitrary, non- speaking, and bad in law.
2. Because the Ld. CIT(A) has grossly erred in upholding the action of the Learned Assessing Officer (Ld. AO) in completing the assessment under section 144 of the Act without adhering to the principles of natural justice.
3. Because mere cash deposits in a bank account, without any corroborative tangible material on record, cannot by itself form a valid basis for belief of escapement of income under the Act.
4. Because the initiation of proceedings by the Ld. AO was without proper application of mind, rendering the entire assessment process invalid, and the Ld. CIT(A) erred in law in sustaining such action by dismissing the appeal.
5. Because the approach of treating cash deposits as ‘unexplained income’ and taxing the same at the rate of 60%, while simultaneously considering other credits as business turnover, is arbitrary, inconsistent, and contrary to the settled principles of law.
3 -: 6. Because the Learned Commissioner of Income Tax (Appeals) has erred in law and on facts in not considering the duly audited books of accounts, which were available and produced during appellate proceedings. The rejection of such material evidence is arbitrary, contrary to the provisions of the Income-tax Act, 1961, and violative of the principles of natural justice.
7. The Appellant craves leave to add, alter, modify, or withdraw any of the above grounds of appeal at the time of hearing, in the interest of justice.
Brief facts of the case are as follows: The assessee is an individual. The assessee did not file his return of income for the relevant assessment year namely AY 2017-18. The assessment was selected for scrutiny to examine the source of cash deposits made during the demonetization period. Since assessee did not respond, the bank statement of the assessee was obtained by issuance of notice u/s.133(6) of the Act to the Bank Manager. On receipt of the bank statement, assessee was directed to explain the source of cash deposits and also why the entire credit minus cash deposits should not be taken as assessee’s total turnover for the purpose of presumptive taxation u/s.44AD of the Act. Since there was no reply to the show-cause notice issued proposing the aforementioned additions, assessment was completed u/s.144 of the Act vide order dated 18.11.2019. In the said assessment order, the AO added the entire cash deposit of Rs.14,96,320/- as unexplained investment u/s.69 of the Act and also estimated the
Aggrieved by the assessment completed, assessee filed appeal before the First Appellate Authority (FAA). Before the FAA, it was submitted that assessee along with his brother is engaged in trading of MFGC goods. It was submitted that income for the relevant assessment year was below the taxable limit. It was submitted that the audited books of accounts during the course of assessment proceeding could not be uploaded on account of medical issues suffered by assessee’s brother. The assessee before the FAA made elaborate submissions which are reproduced from pages 3 to 7 of the impugned order of the FAA. However, the FAA rejected the contentions of the assessee by observing as under:- “Here the main issue relates with the addition of Rs.14,96,320/- on account of unexplained investment u/s.69 and of Rs.9,92,252/- on account of business income assessed u/s.44AD. On perusal of the records, it is observed that the assessee did not furnish details during the assessment proceedings. Moreover, now the assessee is replying but failed to furnish details of indirect and direct expenses. Further, explanation submitted by the assessee is not found to be satisfactory and accordingly appeal of the assessee is dismissed.
Aggrieved by the order of the FAA, assessee has filed the present appeal before the Tribunal. The Ld.AR submitted that on 5 -: medical issues of assessee’s brother, he could not represent the case before the AO. Consequently, the assessment was passed on best judgment basis u/s.144 of the Act. It was further submitted that before the FAA assessee had submitted all the details and the books of accounts of the assessee which was audited by a Chartered Accountant was duly uploaded. It was stated that the entire bank credits and cash deposits are out of turnover of assessee’s business in MFGC goods. Therefore, it was prayed in the interest of justice and equity, the matter may be restored to the files of the AO for proper examination.
The Ld.DR strongly supported the orders of the AO and the FAA.
We have heard rival submissions and perused the materials available on record. The assessee had not responded to the notice issued u/s.142(1) of the Act and also the show-cause notice issued during the course of assessment proceedings. We strongly deprecate the nonchalant attitude of the assessee for not responding to the notices issued from the office of the AO. Before the FAA, assessee had furnished his submissions. It also claimed that the books of accounts which are audited has been uploaded.
6 -: On perusal of the impugned order of the FAA, we notice that the FAA has passed a cryptic order without taking into all the evidences that are placed on record. Therefore, in the interest of justice and equity, since the assessment order is also ex-parte, we deem it appropriate to restore the issues before us to the files of the AO for proper adjudication of the matter. It is ordered accordingly.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open court on 9th December, 2025 at Chennai.